Not only is it important for business owners to do their bank reconciliation prior to any financial decision in their business says Edmonton bookkeeping, but it is also just as important that business owners are checking to ensure any errors or mistakes are caught so that they can end up with the most accurate financial statements possible. If business owners are using the statements in order to make financial decisions, having them with errors on them is not going to help them make a guided financial decision. Business owners who are doing their own bank reconciliation should ensure that they know what the most common errors are, and how to fix them.
Since a bank reconciliation is going to show an entrepreneur how much money they have in their business, after taking into consideration transactions that have been accounted for but have not cleared their bank yet. Edmonton bookkeeping says that if entrepreneurs have errors in their uncleared deposits, it will either make it look like they have more money than they do, which could lead to making poor financial decisions that would put their business at risk. And if an entrepreneur has errors on uncleared checks, then they are expenses will look overstated, causing a business owner to think they owe more money than they actually do.
Edmonton bookkeeping says that uncleared transactions are one of the most common errors that exist on bank reconciliation reports, with 50% of their own clients having these errors on the bank reconciliations they prepared themselves. Extremely important that business owners know what to look for so that they can fix the air easily. In order to look for the air, a business owner should understand why a charge might appear as uncleared. When a business owner writes a check, they will enter the check amount into their accounting software, and that amount must be cashed in order for it to clear their bank account. Therefore, their bank reconciliation may show that they have the transaction pending that has not happened yet. Checks are typically the most common uncleared transactions, and it may take a long time to clear, depending on when the vendor received they payment, and when they deposit into their bank.
Other examples of uncleared transactions could be if a business owner has used a debit card or bank machine, or credit card transactions. These can take anywhere between 1 to 5 days to show up in the bank account of a business, depending on what type of transaction and when the transaction was made. For example, bank machine transactions on a weekend may take longer than just a couple of days. By understanding these transactions, a business owner can then check their bank reconciliation to see how long those uncleared charges have been on the report. If it has been pending since last report, a business owner should check for errors. Such as the transaction being entered in twice by mistake, or an incorrect date being used. Once an entrepreneur can catch these errors, they disappear off of the report, and they end up with an accurate bank reconciliation report.
When entrepreneurs understand the most common reasons for errors, and how to fix them, Edmonton bookkeeping says that they will end up with a powerful tool for helping them make informed financial decisions in their business. Business owners should be doing this prior to any financial decision in their business no matter how big or small, so that business owners can be confident that there making decisions that are going to help their business.
Edmonton Bookkeeping | How Business Owners Verify The Accuracy Of Financial Statements
A great habit that business owners can get into early on in their business is running a bank reconciliation before any financial decision in their business says Edmonton bookkeeping. Whether they are paying employees, vendors or themselves, and even if they are planning on making an asset purchase, a business owner will be able to make an informed decision by running a bank reconciliation, to verify they have the funds to be able to make that decision.
In order for a business owner to ensure that they are doing the bank reconciliation accurately, they need to know how to start, and how to start accurately, to avoid making errors from the beginning. A business owner should ensure that they are checking their statement balance, to verify that the beginning of the new balance is matching the ending balance of the previous statement. Edmonton bookkeeping says that this is an important place to start, so that entrepreneurs can ensure they are starting exactly where the previous report left off. If the two totals do not match, the reconciliation will not end up being accurate. If the two totals do not match, all an entrepreneur has to do is we reconcile the previous reports, and that will ensure those two amounts match.
Something else for entrepreneurs to check as they start the process is verifying that the registered balance matches the ledger. Edmonton bookkeeping says that if this is not the case, the problem is typically an entrepreneur accidentally entering in a future item. This can happen with the key entry error, or, if an entrepreneur is very behind on their bookkeeping, and they are trying to catch up very quickly.
The next thing that a business owner should do to ensure that they are starting the bank reconciliation accurately, is ensure that they have all the information they need to start including their bank balance, all of their bank and credit card statements for the last month, and a record of all checks written in the previous month. This is all the information business owner needs says Edmonton bookkeeping, and they can start entering information into their bank reconciliation in their accounting software.
It is very important that business owners are very diligent and ensuring that they are entering things and accurately so that they can minimize errors as they go. If they are not careful, it will end up in them having to spend time reviewing the entire statement afterward, to see if there are errors, and what they must do to fix them.
By not only being careful when they enter information into their accounting software for their bank reconciliation but ensuring that they are doing it often can help them keep accurate ongoing records so that whenever they need the information to make a financial decision, it is possible. However, if business owners find that they are struggling with it, either in creating the report prior to making decisions, or in being able to do it accurately, or fix errors, the report is so important that a business owner might want to consider hiring someone to help them. Getting in Edmonton bookkeeping company like always bookkeeping can help ensure that entrepreneurs are ending up with timely and accurate bank reconciliations in order for them to be able to make informed financial decisions in their business.